Australia's luxury-car binge belies its drop in living standards..

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Australia's luxury-car binge belies its drop in living standards

Michael Heath
Published: August 25, 2016 - 7:04PM

Aussies are buying Bentleys, Jaguars, BMWs and Mercedes in record numbers even as living standards fall in a sign that rising inequality seen across the developed world is spreading here as well.

Luxury car sales surged to a record 104,277 in the 12 months through July, a 15.7 per cent increase on the same period a year earlier, according to an index collated by CommSec, Commonwealth Bank of Australia's brokerage unit.

Local sales of BMW, Audi, Mercedes-Benz, Bentley, Jaguar and McLaren all hit record highs in the past 12 months, according to the bank.
Overall new vehicle sales last month climbed just 1.6 per cent on an annual basis, with SUV sales rising 6.9 per cent.

"A lot has been made of softer economic conditions over the first half of 2016, however the same cannot be said for the luxury car market,'' said Savanth Sebastian, an economist at CommSec. "Higher home prices are boosting wealth levels and consumer spending. Aussie consumers are keeping it quiet, but they are buying luxury cars in record numbers.''
The jump in demand mirrors a trend in other developed markets, with alternative investments such as Ferraris, jewels or fine wines going mainstream as investors grapple with ultra-low interest rates and volatile sharemarkets.

The RBA cut rates to a record-low 1.5 per cent this month as it tries to tame the currency and spur consumer spending. But the downside of easy monetary policy is it can disproportionally hurt lower income earners as the wealthy can benefit from stronger financial and housing markets fuelled by cheap money. In the first three months of this year, Australia recorded its ninth straight quarter of falling net disposable income per capita.



Australia has traditionally taken pride in its egalitarian "fair go" culture as an economic halfway house between the US and European models: maintaining a robust welfare state without stifling business via excessive taxation. That's even as its income inequality ranking sits above the OECD average.

Yet low interest rates are clearly having some positive effects. Consumer confidence jumped following this month's cut and is now close to a three-year high. And most home loan owners are on floating rate mortgages and as a result any reduction in the benchmark quickly flows through to their wallets.

Bloomberg

http://www.theage.com.au/business/re...24-gr0kms.html